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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

Two Indian pharmaceutical companies, one strong in research and the other strong in distribution, form a separate jointly owned company to develop and sell a new drug while both continue their own businesses independently. This arrangement is best described as a:

This is a joint venture. The two companies create a separate, jointly owned entity to pursue a specific project, pooling their research and distribution strengths while each continues as an independent business. Mergers and acquisitions would involve loss of identity or transfer of control, which does not happen here.

  1. AMerger
  2. BTakeover through acquisition
  3. CJoint ventureCorrect
  4. DDivestment through a management buyout

Explanation

Two firms creating a separate jointly owned entity for a specific purpose while remaining independent is a joint venture. In a merger, one or both lose separate identity. An acquisition means one buys control of the other, and a management buyout is a divestment, neither of which is described.

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